Three corporate giants are teaming up to combat what billionaire Warren Buffett calls a "hungry tapeworm" feasting on the U.S. economy: health care.
Amazon.com Inc., Buffett's Berkshire Hathaway Inc. and JPMorgan Chase & Co. said they plan to collaborate on a way to offer health care services to their U.S. employees more transparently and at a lower cost. The three companies plan to set up a new independent company "that is free from profit-making incentives and constraints," according to a short statement on Tuesday.
The move sent shares of health care stocks falling in early trading. Express Scripts Holding Co. and CVS Health Corp., which manage pharmacy benefits, slumped 6.7% and 5.5 percent, respectively. Health insurers Cigna Corp. and Anthem Inc. also dropped.
The health care industry has been nervously eyeing the prospect of competition from Amazon for months. While the new company created by Amazon, Berkshire and JPMorgan would be for their U.S. staff only, this is the first big move by Amazon into the industry. The new collaboration could pressure profits for middlemen in the U.S. health care supply chain.
"Hard as it might be, reducing health care's burden on the economy while improving outcomes for employees and their families would be worth the effort," Amazon Chief Executive Officer Jeff Bezos said in the statement. "Success is going to require talented experts, a beginner's mind, and a long-term orientation."
The group announced the news in the very early stages because it plans to hire a CEO and start partnering with other organizations, according to a person familiar with the matter. The effort would be focused internally first, and the companies would bring their data and bargaining power to bear on lowering health care costs, the person said. Potential ways to bring down costs include providing more transparency over the prices for doctor visits and lab tests, as well as by enabling direct purchasing of some medical items, the person said.
In the statement, JPMorgan Chase CEO Jamie Dimon said the initiative could ultimately expand beyond the three companies.
"Our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans," he said.
High Costs
Health care spending was estimated to account for about 18% of the U.S. economy last year, far more than in other developed nations. Despite efforts to curb costs, studies suggest that U.S. doctors and hospitals continue to provide too much health care. In a survey of physicians' perspectives published last year in the journal PLOS One, the average estimate was that 20% of medical care was unneeded, including about a quarter of tests, a fifth of prescriptions and more than one in 10 medical procedures.
Amazon, Berkshire and JPMorgan are among the largest private employers in the U.S., with a more than 1 million workers combined. And they're among the most valuable, with a combined market capitalization of $1.6 trillion, according to data compiled by Bloomberg.
